China TiO2 suppliers risk losing market share on price hikes

Focus article by Alexis Gan

SINGAPORE (ICIS)–China’s titanium dioxide (TiO2) suppliers have been raising offers given their low inventory, but they risk losing market share to European and North American competitors, which are quoting lower prices, industry sources said on Monday.

TiO2 exports from major Chinese suppliers were available last week at $1,900-2,000/tonne FOB (freight on board) China, with the prices expected to increase by around $50/tonne for May cargoes, they said.

Major Chinese suppliers raised their prices last week by yuan (CNY) 300-600/tonne ($48-97/tonne), taking the cue from an industry major’s CNY600/tonne price hike on 9 April.

“I wasn’t able to export to Europe for a few months, and with the current bullish selling ideas from our supplier, it doesn’t seem feasible for export later on,” said a distributor of Chinese cargoes.

TiO2 suppliers in China have been hiking prices over the past two weeks as they anticipate a seasonal pick-up in demand for key downstream-paint and coating sector from April through June, with some keen to recoup margins, which had been eroded over the past two years amid overcapacities, market sources said.

But sellers in China must be mindful of weakening appetite for its TiO2 exports, particularly in Europe because of the weak euro, they said.

“The weaker euro since the second half of 2014 have diminished import appetite for our cargoes. If you look at the recent Chinese export statistic, it is actually declining by more than 10% from the previous year,” a Chinese supplier said.

“In April, you might [have] heard that the European market pricing is higher but in [reality], prices could be lower owing to forex [foreign exchange] fluctuation,” the supplier said.

Meanwhile, non-Chinese TiO2 producers have been offering lower-priced cargoes to big buyers in the Asia-Pacific region, market sources said.

A large buyer in southeast Asia is currently in talks for non-Chinese and chloride-TiO2 paint grade for the second quarter at between $2,300-2,600/tonne CFR Asia, which was $50-100/tonne lower from the first quarter.

“The price is negotiable. I can get another $50/tonne reduction at the lower end [of the price range] from my regular European or North American suppliers, so it is too troublesome to switch to Chinese products. Cost savings is not that high yet for switching,” the buyer said.

Suppliers from the West are attempting to re-capture their market share from the Chinese suppliers by offering lower prices for TiO2.

However, a Chinese source said that lower-end grade would not be easily available unless bundled with suppliers’ main TiO2 grade.

There are more than 100 grades of TiO2 in the market, depending on applications.

“Weaker China’s economic growth, recently indicating the slowest growth since 2009, in addition to uncertainties in eurozone, could drag overall general business sentiment,” said a sources from a southeast Asian distributor, which has high TiO2 inventory amid slow sales.

China, which is the world’s second biggest economy, posted a first-quarter GDP growth of 7.0%, the slowest in six years.

($1 = CNY6.21)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections